Blue Owl Capital (NYSE:OBDC) reported second-quarter 2026 adjusted net investment income of $0.34 per share, up from $0.31 in the prior quarter, as a large investment realization and higher specialty-finance dividend income lifted results. Net asset value per share declined to $14.26 from $14.41 in the first quarter, primarily due to a markdown on one portfolio company.
Chief Executive Officer Craig Packer said adjusted net investment income translated to a 9.6% annualized return on equity, more than 100 basis points above the prior quarter. The company said earnings comfortably covered its base dividend and supported a supplemental distribution.
Large Mavis Realization Boosts Income
Management attributed much of the quarter-over-quarter increase in net investment income to the repayment of its preferred-equity investment in Mavis Tire. Blue Owl collected approximately $274 million in cash from the repayment, including $66 million of accrued payment-in-kind, or PIK, interest. The investment generated a 1.5-times multiple on invested capital, according to Senior Managing Director Logan Nicholson.
The Mavis repayment was Blue Owl’s largest PIK investment realization to date and contributed about $0.03 per share of fee income, management said during the question-and-answer session. Chief Financial Officer and Chief Operating Officer Jonathan Lamm said the income was recorded as fee income because of the way the preferred instrument was repurchased, rather than as interest income.
Nicholson said Mavis had grown to roughly four times its size since Blue Owl’s initial preferred-equity investment and had become one of the country’s largest tire-service companies.
The realization reduced PIK income to 10.7% of total investment income in the second quarter, compared with peak levels above 13% two years earlier. Nicholson said much of Blue Owl’s PIK exposure was intentionally structured at investment inception to enhance returns rather than resulting from distressed borrowers.
Higher dividend income from the company’s life sciences-focused specialty finance vehicle, LSI, also contributed to quarterly earnings. LSI benefited from the repayment of ITM Radiopharma, which generated an internal rate of return above 20% on a $140 million position, Nicholson said. Since inception, LSI has generated returns of more than 15% to Blue Owl, according to management.
Portfolio Activity Remains Muted
Blue Owl funded $429 million of investments during the second quarter and received $747 million of repayments. The imbalance reduced net leverage to 1.11 times, the company’s lowest level in more than two years and within its target range of 0.9 to 1.25 times.
Management said transaction activity remained subdued as refinancing activity and merger-and-acquisition activity slowed amid asset-price volatility, wider spreads and geopolitical uncertainty. Nicholson said many refinancings that had accounted for a significant portion of activity in prior quarters have become less attractive in the current spread environment.
“Underwriting discipline continues to take precedence over deployment volume,” Packer said. He added that the company remains active in discussions with borrowers and sponsors, including opportunities to support existing portfolio companies through add-ons and other financings.
Blue Owl remains focused on the upper middle market, where management said it sees the best risk-adjusted returns. Packer said the firm has a broad sponsor and company coverage network and does not believe it is missing investment opportunities despite the muted market environment.
The company said it has more than $10 billion of available capital across its platform and could deploy selectively as conditions improve. Packer said the forward rate curve is roughly 100 basis points higher than earlier in the year, while spreads remain wider and financing terms have become more attractive for direct lenders.
Isolated Credit Markdown Drives NAV Decline
Blue Owl said the decline in net asset value was largely driven by a credit-specific markdown on Loparex. The company had been pursuing a transaction that would have brought in new equity and recapitalized its balance sheet, but the transaction did not close, leading Blue Owl to mark down its position.
Non-accrual investments represented 0.8% of the portfolio at fair value at quarter-end, slightly lower than the prior quarter. Nicholson said Loparex, which represented about 90 basis points of the portfolio at cost, accounted for the divergence between non-accrual measurements at cost and fair value.
Management said broader portfolio fundamentals remained stable. Portfolio-company revenue and EBITDA grew at mid- to high-single-digit year-over-year rates, while interest coverage remained around two times. Average borrower net leverage was 5.8 times, down modestly over the past two years, and loan-to-value ratios were stable at 47%.
Blue Owl’s portfolio is diversified across 30 industries, with an average position size of approximately 40 basis points. Software represented about 18% of the portfolio. Nicholson said software remained one of the portfolio’s best-performing sectors in terms of revenue and EBITDA growth, though management continues to monitor developments in the sector and remains cautious on new software deployment.
Capital Structure and Repurchases
The company repurchased $35 million of shares during the quarter, which Lamm said added $0.03 per share to net asset value. Since the fourth quarter of 2025, Blue Owl has repurchased about $220 million of stock.
Lamm said the company evaluates buybacks, leverage and new investments as competing uses of capital and expects to continue repurchasing shares when management views the stock as attractive, while monitoring liquidity and leverage.
During the quarter, Blue Owl raised about $800 million of unsecured debt and addressed roughly $1 billion of legacy maturities in July. It also amended and extended its revolving credit facility, retaining $4 billion of capacity with unchanged pricing. The company eliminated two higher-cost secured facilities as part of its capital-structure optimization efforts.
Total liquidity, including cash and undrawn credit capacity, stood at approximately $3.5 billion after accounting for the July bond maturity, exceeding the company’s unfunded commitments. Lamm said the company had about $0.29 per share of spillover income, providing additional support for the base dividend.
About Blue Owl Capital (NYSE:OBDC)
Blue Owl Capital Corporation (NYSE: OBDC) is a publicly traded business development company sponsored by Blue Owl Capital, a global alternative asset manager. Launched in 2020, the firm provides customized financing solutions to middle-market companies across various industries. As an externally managed BDC, Blue Owl Capital Corporation leverages the deep credit?investment capabilities of its sponsor to deliver flexible capital tailored to the needs of growing businesses.
The company’s investment activities span a range of private credit products, including first?lien senior secured loans, unitranche facilities, second?lien financings, mezzanine debt, and minority equity co-investments.
